Table of Contents:
- Colorado Opportunity Zone Overview
- Denver Opportunity Zones
- Pikes Peak and Colorado Springs Opportunity Zones
- Investing in Colorado Opportunity Zones
For U.S. commercial investors and developers, Opportunity Zones have become a very hot topic of discussion in recent months.
The Opportunity Zone program was established in the Tax Cuts and Jobs Act of 2017. It was put in place to spur investment, new development and revitalization in targeted census tracts.
The tax law offers the incentive of reduced and/or deferred capital gains taxes to taxpayers who invest unrealized capital gains – estimated at nearly $6 trillion in the U.S.– into qualifying Opportunity Zone funds.
Colorado Opportunity Zones
One of the common misperceptions about Opportunity Zones is that these are blighted areas. That is not necessarily the case.
Designated areas do have to meet certain minimum percentage thresholds for low income – 20% or more of its population living in poverty with a median income at 80% or less of the state median.
However, many are situated in areas that are ripe for revitalization and further economic development, and Opportunity Zones simply provide a tool to direct investment to high priority areas and projects in otherwise vibrant communities.
The diverse CRE market of Colorado is a great example of a place where Opportunity Zones could have a lasting effect.
Statewide, Colorado is home to 126 census tracts that have been approved by the U.S. Treasury Department as certified Opportunity Zones.
According to Reonomy data, those zones contain some 143,000 commercial properties – 62,000 of which are vacant land parcels. To put that into context, those properties represent nearly 20% of the 800,000 commercial properties that Reonomy tracks throughout the state.
Designated zones can be found throughout the state in urban, suburban and rural areas.
Colorado’s Office of Economic Development and International Trade (OEDIT) conducted a rigorous process to nominate census tracts for Opportunity Zone status, which included collaborating with regional economic development partners to select census tracts with both need and opportunity that present a strong case for private capital investment.
That being said, a majority of the census tracts are outside of Colorado’s Front Range (the most populated area of the state) and are aimed at boosting economic development in the state’s struggling rural economies. Although Denver has been a magnet for new residents, rural areas have been experiencing a decline.
According to the Denver Post, Denver’s population grew by nearly 23% between 2000 and 2015, while one four-county section on the state’s southern border reported a 12% drop in its resident base.
Colorado’s largest zones by land mass are located in more rural counties, including Alamosa, Bent, Rio Blanco, Crowley, Cheyenne, Lake and Las Animas.
Denver Opportunity Zones
The Denver-Aurora-Lakewood MSA is home to 37 of the state’s 126 qualifying opportunity zones.
According to Reonomy, those Opportunity Zones contain some 12,000 individual commercial properties.
The zones provide added incentive to attract private equity investment in what has already been a hot development market. The city had a record-setting 2018 with over $2.28 billion in current or planned commercial development.
Denver is home to one of the fastest-growing economies in the country. Denver continues to be one of the most popular relocation destinations in the U.S., especially among Millennials who are attracted to its diverse culture and entertainment and abundant outdoor recreation as the gateway to the Rockies.
In the past seven years alone, Denver’s population has increased by 100,000 – and the growth doesn’t look like it will stop any time soon. The Mile High City is growing by a staggering 1.8 percent year over year, which is faster than some other leading markets, like Seattle and Atlanta, according to the U.S. Census Bureau.
Top employers include United Airlines, Kaiser Permanente, Century Link and Wells Fargo among others.
Zones are scattered throughout the entire MSA, including the cities of Arvada, Aurora, Lakewood and Thornton, as well as in the core of Denver.
According to Denver’s Office of Economic Development, some of the emerging hotspots for development and redevelopment within the city include:
- Welton Street: Situated in the Five Points area, this area of one of Denver’s oldest neighborhoods is seeing a surge in new growth thanks to its proximity to downtown, access to transit and a “cool vibe” that is attracting new residents and investment capital.
- Brighton Boulevard: This roadway starts downtown at River North (RiNO) and stretches 23 miles to the Denver International Airport. The city has referred to it as the “greatest concentration of undeveloped land” in Denver.
- River North / South Platte Riverway (RiNo): This neighborhood is an eclectic mix of old warehouses, railyards, mixed-use development and a growing community of creative businesses and artisans. The city has been working to spark redevelopment along a 12-mile stretch of the South Platte River with a mix of retail, residential, hotel, industrial and office.
Pikes Peak and Colorado Springs Opportunity Zones:
The Pikes Peak Region has eight designated Opportunity Zones, and the Colorado Springs MSA alone is home to some 3,500 commercial properties that lie within those zones.
As a whole, the region is viewed as an up-and-coming market that is home to more than 690,000 people and a $32 billion annual economy.
Although Colorado Springs has been overshadowed by Denver in the past, the city is proving that it has quite a story to tell. Downtown has experienced a surge in development thanks to growing demand from employers, residents and visitors, not to mention investors who have gotten priced out of the Denver market.
Colorado Springs also has been recognized nationally as the:
- #1 Most Desirable Place to Live – 2018 U.S. News and World Report
- #1 Fastest-Growing Cities for Millennials – 2018 Brookings Institute
- #1 Employment Growth – 2019 Wallethub.com
Stakeholders in the region have collaborated to create a regional investment prospectus to identify assets and opportunities within the designated Opportunity Zones to help attract private investment. Those zones are located in six distinct regions that include:
Downtown Colorado Springs
Downtown has experienced a spike in new construction over the past two years. During the five year period between 2013-2017 there were an estimated $209.7 million in construction projects completed, according to the Downtown Colorado Springs economic development partners.
In comparison, there was an even greater amount – $238.8 million – under construction at the start of 2018. In particular, downtown has seen 600 new residential units and 550 new hotel rooms that have been either recently completed or are under construction.
Downtown is home to the main business district, and is a popular destination for employers, residents and visitors alike due to its walkability.
North Nevada Corridor
This area is an emerging high-tech hub that has benefited from the presence of the University of Colorado-Colorado Springs.
It is home to a variety of tech firms, new start-ups and the headquarters of the National Cybersecurity Center, an organization that promotes public policy, cyber awareness and cyber workforce development.
Southeast Colorado Springs
This diverse area of the city is hoping to attract in-fill projects, mixed-use redevelopment and new affordable housing.
Colorado Springs Airport
Proximity to the airport is one of the main attributes of this zone. One of the goals of the zone is to spur development activity within the Peak Innovation Park, a 900-acre master planned community that is zoned for office, industrial, retail and hospitality.
This unincorporated part of El Paso County is located northeast of downtown, with a population of 15,000 and ample land for development and.
City of Fountain
Located south of Colorado Springs along I-25, this city has seen recent revitalization of its historic Olde Town. One likely target for future investment will be multifamily and affordable housing development.
Investing in Colorado Opportunity Zones
While there are a number of different mapping tools and Opportunity Zone funds to help you invest in Colorado Opportunity Zones, the only tool that truly caters to commercial real estate investors and developers, quite frankly, is Reonomy.
Reonomy Opportunity Zone Property Search
With Reonomy OffMarket, you can search any Colorado city, county, neighborhood, or street, specifically for commercial properties that sit within a Qualified Opportunity Zone.
Search for properties based on granular location settings, asset class, building-level information (building size and age), transaction history, debt history, and ownership.
When you identify Opportunity Zone properties of interest, you can use Reonomy to access the owner details and owner contact information on those properties individually.
This allows you to reach out directly to property owners with what you’ve gleaned from your property analysis.
By sourcing your Opportunity Zone investment off-market, you can broaden your scope of possibilities, avoid the competition, while still basking in the program’s tax benefits.
Colorado Opportunity Zone Mapping Tools
Aside from Reonomy, there are a variety of other local and national tools that you can use to get a better idea of the opportunity zone landscape in Colorado.
While Reonomy can be used as a deal-making tool, these Opoortunity Zone tools also provide additional sources of information to help kick-start a property search.
The OEDIT also provides a map of the state’s designated Opportunity Zones.
The areas highlighted in yellow are designated Opportunity Zones. You can scroll over a zone to get the designated census tract and also zoom in to get more detailed location and street information.
For example, the below screenshot of Englewood/Sheridan shows designated zones that include at least six adjacent census tracts.
Economic Innovation Group
Economic Innovation Group (EIG) has been a proponent of Opportunity Zones since the beginning, with founder Sean Parker largely driving the idea of the tax reform from the start.
EIG’s Opportunity Zone Map lets you search by various levels of geography within their search bar. You can enter “Colorado,” “Colorado Springs,” “El Paso County,” all the way down to a specific census tract number, such as “08041005000”.
The map will then zoom into your searched area or Opp Zone and show you its county, population, poverty level, and median household income.
Opportunity360‘s Opp Zone Explorer has an abundance of filters that you can use to scan and see where Colorado QOZs lie throughout the state.
Filters include those for location, and a number of Yes/No “Federal Place-Based Program Filters.”
The tool allows you to search Colorado Opportunity Zones by county or whether they’re in a rural or urban area. You can also add custom filters for “Education Score,” “Mobility Score,” Economic Security Score,” and more.
Colorado Opportunity Zone Funds
As it is with any Opportunity Zone nationally, you must make all investments through a Qualified Opportunity Zone Fund.
You can either self-certify by filing the IRS 8996 Form, or find an Opportunity Fund that serves the market you’re looking for.
NCSHA’s Directory Overview of QOFs shows you the funds that can be used to invest in Colorado OZs, and for specific asset types.
Some examples of O-Funds that are currently targeting the Colorado market include:
Caliber Tax Advantaged Opportunity Zone Fund
This fund has a target size of $500 million and a regional focus in Arizona, Colorado, Nevada, Texas and Utah. The fund is considering investments in economic development, commercial real estate, hospitality, mixed-use development, multifamily, single-family residential, student housing and affordable housing.
Gravitas is a $25 million fund with a specific focus on Aurora, Colorado. Specifically, the fund is focusing on investment in a master-planned community with 1,100 single-family residential lots, 60 acres of commercial and hospitality development and 11 acres of multifamily residential.
Origin QOZ Fund
Origin has a $200 million target with a geographic focus on nine states that include Colorado, as well as Arizona, Florida, Georgia, Illinois, Minnesota, North Carolina, Tennessee and Texas. The fund intends t invest specifically in multifamily residential.
Rural COZ has a target size of $50 million with a geographic focus in both Colorado and Wyoming. As the name suggests, this Fund is focused on rural Colorado and selective communities beyond with investments that could include commercial real estate, mixed-use development, multifamily residential, workforce housing and small business development.
No matter the case, whether you’re self-certified as a QOF or not, Reonomy is still the only national platform that allows investors and developers to search nationally for commercial properties in Opportunity Zones.